Transcript Example 1 - Southeastern

Example 1
Patterson Electronics supplies microcomputer circuitry
to a company that incorporates microprocessors into
refrigerators and other home appliances. One of the
components has an annual demand of 250 units, and
this is constant throughout the year. Carrying cost is
estimated to be $1 per unit per year, and the ordering
cost is $20 per order.
a. To minimize cost, how many units should be ordered
each time an order is placed?
b. How many orders per year are needed with the
optimal policy?
c. What is the average inventory if costs are minimized?
Example 2
Annual demand for the Doll two-drawer filing cabinet is
50,000 units. Bill doll, president of Doll Office Suppliers,
controls one of the largest office supply stores in
Nevada. He estimates that the ordering cost is $10 per
order. The carrying cost is $4 per unit per year. It takes
25 days between the time that Bill places an order for
the two-drawer filing cabinets and the time when they
are received at his warehouse. During this time, the
daily demand is estimated to be 250 units.
What is the economic order quantity?
What is the reorder point?
What is the optimal number of orders per year?
Example 3
Rob Roller has been in charge of inventory policy at
Cyclorama, a large retail bicycle shop in Orlando,
Florida. He now orders Chrome-Moly frames from
Frameco, a local frame supplier. Cyclorama builds
each bike by adding different Shimano component
groups to each frame. Currently, cyclorama's annual
demand for frames is 2,000 per year. The lead-time is
10 days and the ordering cost per order is $50. The
holding cost is estimated to be 25% of the unit cost.
Frameco offers the following discounts:
Example 3 - Cont
PRICE
BREAK
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
LOWER QUANTITY
UNITS
0
11
21
31
41
51
61
71
81
91
101
111
121
131
141
UPPER QUANTITY
UNITS
10
20
30
40
50
60
70
80
90
100
110
120
130
140
UNIT PRICE
($)
220.00
219.99
219.98
219.97
219.96
219.95
219.94
219.93
219.92
219.91
219.90
219.89
219.88
219.87
219.86
Example 3 - Cont
(a) What are the optimal order quantity and the
total inventory cost for Cyclorama given the
data?
(b) Rob is optimistic about future demand. If
annual demand becomes 3,000 frames, what is
the impact on the optimal order quantity?
© What is the impact if the annual demand is
4,000 frames?
Example 4
Flemming Accessories produces paper slicers used in
offices and in art stores. The minislicer has been one of
its most popular items: Annual demand is 6750 units
and is constant throughout the year. On average,
Kristen can manufacture 125 minslicers per day.
Demand for these slicers during the production process
is 30 per day. The setup cost for the equipment
necessary to produce the minislicers is $150. Carrying
costs are $1 per minislicer per year. How many
minislicers should Kristen manufacture in each batch?